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CH 14 - CH 14 Options and Corporate Finance 1 Options Basic...

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CH 14. Options and Corporate Finance
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1. Options: Basic A contract that gives its owner the right to buy or sell some asset at a fixed price on or before a given date. It is not the obligation for holders but obligation to issuers. The action of buying or selling underlying assets via option is called “exercising an option.” Ex) stock option The option is composed of information below: - Strike or exercise price: The fixed price specified in the option contract at which the option holder can buy or sell the underlying asset. - Expiration date: The last date on which the option could be exercised.
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European option: An option that may be exercised only on the expiration date. American option: An option that may be exercised at any time until the expiration date. A call option: option to buy assets at the fixed price during a particulate time period. A Put option: option to sell assets at the fixed price during a particulate time period.
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2. Stock option quotations Markets: Chicago Board Option Exchange (CBOE), New York, American and Philadelphia stock exchange markets. CBOE options usually expire following the third Friday of the expiration month.
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